CERC sets sight on renewable targets: brings in virtual PPA norms

India's Power market regulator CERC (Central Electricity Regulatory Commission) has introduced a new framework for Virtual Power Purchase Agreements (VPPAs).

Simply put, it enables large companies to "buy" green energy on paper without physical power delivery. It is in the form of a bilateral contract for at least 1 year, non-tradable and non-transferable at a mutually agreed price between the renewable energy generator and the buyer (Corporates). The buyer doesn’t actually receive the electricity. The Generator sells the actual electricity to the general power market (the "grid") at the current market price. If the market price is more than the PPA, the generator pays the difference to the Corporates. The reverse happens when the market price is less than PPA.

For every unit of power generated, the buyer gets Renewable Energy Certificates (RECs). These certificates are the legal proof the company can use to show they met their green targets.

These guidelines are primarily aimed at Designated Consumers—large, energy-heavy industries like Steel and Cement plants, Data Centres (which need 24/7 green claims), Refineries and large IT Parks and Multinational corporations with global "Net Zero" targets. They get to meet 100% green goals without changing their current electricity provider or building a plant.

Our view: 

The step by CERC is a form of financial incentives to promote green energy. 

a.   It allows companies to fund renewable energy projects and claim the credit for it, without needing a direct physical connection to the power plant. 

b.   It allows Corporates to comply with renewable energy obligations without physical delivery of green power.

c.    It enables generators a guaranteed income from large Corporates - ensuring ease of lending by Banks to build more solar and wind firms.

d.   For India, it speeds up India’s goal of reaching 500 GW of non-fossil fuel capacity by 2030 by bringing in private corporate money.

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Link - https://economictimes.indiatimes.com/industry/renewables/cerc-brings-in-virtual-ppa-norms-for-renewable-targets/articleshow/126177688.cms?from=mdr